The Real 'Fear' Index Just Went To '11'

A funny thing has happened below the surface of the markets since late last year. As first The Fed, then The BoJ, and The ECB respectively saw their credibility crushed into a mumbling excuse pool of elite utterances as global bond yields crashed along with global growth and inflation expectations, professional investors have been busily buying crash protection (carefully masking their buying by managing 'normal' risk measure like VIX through endless nefarious cash, ETF, and Futures manipulation). But now, a week after 'Black Swan' bets soared ahead of the central-plan-destroying Brexit vote, the real 'fear' index has spiked to unprecedentedly high levels.

With VIX flip-flopping to and fro at the whim of every fast money trader...

Deep out of the money, and 'Black Swan' bets have been building...

"It's a black swan type of put," said Steve Sosnick of Timber Hill LLC. "It's very possible there will be an extreme result, and people like to have insurance against a low-probability, high-outcome event."

Smashing the SKEW Index - the real 'Fear Index' to 11 on the Spinal Tap amplifier of historical financial crises...

As a reminder, Skew measures the perceived tail risk of the market via the pricing of out-of-the-money options. Generally, a rise in skew indicates that 'crash protection' is in demand among institutional investors (institutional/professional investors are the biggest traders in SPX options).

In other words, professionals have rotated from 'normal' risk protection to 'extreme' risk protection at the largest pace on record all the while fooling the mainstream investor who sees a declining VIX and continues to pick up pennies in front of the steamroller.

As we explained previously,an unusual move in the skew index (which historically oscillates approximately between a value of 100 and 130) is especially interesting when it diverges strongly from the VIX, which measures at the money and close to the money front month SPX option premiums.

Basically what a 'low VIX/high skew' combination is saying is: 'the market overall is complacent, but big investors perceive far more tail risk than usually' (it is exactly the other way around when the VIX is high and SKEW is low).

In even simpler words, a surprising increase in realized volatility may not be too far away...

So here we have the UK citizenry (We've yet to see what the people's leaders will do on their behalf.) telling the Eu to stuff it for the one and only final reason of liking Britain to be Britain, having realized that the whole Bilderberger thing about taking over the very soul of Europe was a Conspiracy Fact.

Then Saturday and into Sunday we hear that the Frogs and Krauts are going to deliver all remaining EU members, an ultimatum, that they are "On the bus or off the bus" to quote Ken Kesey. Stopping and thinking about it, the remonstrance in both cases is equally vacuous. As is so fucking what. Yet think about it for a moment. They really think that they're that relevant.

Then late yesterday and into this morning, we begin to hear reports that there will be but One Army in the EU and the it will be The EU Army. That the EU can no longer trust the US for it's defense. So NATO becomes irrelevant as well.

Oh and Juncker will no longer allow English to be spoken in the halls of the EU. Which makes the EU's relationships with N. Ireland, Ireland, Scotland, Wales and of course, don't forget all the Nordic Countries, who already utilize English for ... Ya'll see where this is going. Insular. Very very insular ... which is not a consistent philosophical direction for a "Super Power" Clearly a bunch interested in the well being of their serf class

Now, taking all those inconsequential individual trifling events separately it is very easy to disregard them as "ain't that interesting" But in the aggregate, they portend a very very important turning point.

That the dominance of the US is formally writ large. NATO. The UK's special relationship (Thanks, O'Bombah), our descent into a tattered relationship with the entirety of the European Continent; Vicki Nulands recorded on the record "Fuck the EU" let alone farcical US interventions into overthrowing freely elected governments, like across MENA let alone right in Europe itself, The Ukraine. You see, it has officially been acknowledged what has been whispered in the far reaches, that the US is a very bad partner. Is untrustworthy. And rightly so.

Which also means that all of the US de-financialization will likewise continue unofficially as it has over the past, plus accelerate in those areas so far ignored as another "ain't that cute" like the AIIB, alternatives to SWIFT (already operational) etc. Wouldn't take much. Like pricing Russian natural gas in terms of Rubles and or Gold. Just a trifle. A nudge, nudge, poke, poke away

In fact, the Russians and Chinese, who have just about had it up past their butt-holes with DC's threats, recriminations, aggression and hostile policies, might just take an environment like this and further trim the bush of US financial dominance.

This will be looked back upon as a red letter day/week or so. Whatever. Amazing, is it not? Obama wanted to transform America and he hasn't even finished his term, yet. Transform it has been.

At least we've the 2 least dirty shirts right now. Gold (and silver) and US dollars. Yeah, they're still good because we're still the world's power and along with that goes the coinage.

Somehow methinks toady's the day the cracks finally showed up in "reality" To wit: An article or 3 or more about how all the traders in the City (same as anywhere else, duh) have for once in their lives, no fucking idea how to trade markets in this environment. Jesus H Fucking Christ, that's what traders are paid to do, deal with uncertainty, not just be lifted skyward indefinitely upon free destructive opiated money.

TPTB peddles FUD. Fear, Uncertainty, and Doubt. That is the yoke they put on us. Educate as many people as you can, and we might just get though this long enough to create a malevolent AI that will finish the job the Elites started.

Sheeit, now I'm all depressed. Time for more pizza and beer before I break out the popcorn.

Whether it is the EU, Brazil, Venezuela, the USA, China, Japan or some other country, state company or person, the question is the same: Who will take the losses on debt that cannot be repaid?

As Yogi Berra said, "When you come to a fork in the road, take it". That is exactly what we are going to do. It might be wise to just turn around and go back to where we came from but we can't - we burned all the bridges behind us.

We passed the point of no return when we amassed more debt than can be repaid (as individuals, localities, states, and nations). If it can't be repaid, it won't be repaid. Period. So which fork in the road we take is actually just deciding who will take the loss and how. Nobody wants it (the losses), so expect lots of conflict and turmoil with unpredictable outcome.

The Tea Party wants the lenders (banks and bond holders) to eat it. The government wants business owners (individuals and stockholders) to eat it. The FED wants the taxpayers to eat it. Europe wants the US to eat it. China refuses to even discuss eating it. India doesn't acknowledge it exists. Russia is going to steal whatever they can while eating cabbage instead of debt. OPEC thinks they can just raise the price of oil to cover whatever they have to eat. Unions are hell bent on destroying their own jobs and pension plans for some unfathomable reason, so they will eat till they puke it back up to be recycled. Japan eats it, likes it and thrives on it.

On any given day, one or more of these players will make the headlines and enjoy 15 minutes of fame. Pay attention and you will be a babbling, impotent idiot in a week. To stay sane and healthy, just accept that who has to take the loss is unpredictable but that the losses will be taken is certain.

Historically, who eats the debt hasn't been decided peacefully. The conflict has usually been delayed by reducing the purchasing power of money (inflation). The prospect of lots of money that won't buy anything is easier to sell than the idea of no money to buy anything. Of course, the net result is the same - namely declining standards of living and conflict.

Expect the most severe and immediate pain to decimate the lower economic classes where the only lower standard of living is desperation. They have been the most ardent supporters of progressive policy. When they realize they have been betrayed, "progressive" politicians and academic manipulators will feel the heat.

When that happens, "progressive" tends to turn sharply "repressive". At least that is the historic precedent. Whether it will be the case here and now is again unpredictable.

Usually, ZH posters have a clue. So let me assist your struggling brain cells comprehend the obvious. Numerical entries in a computer are not debt. They are ones and zeros. As easily as they were entered, they can be deleted. Our country tested us with a $750b bailout. We took the bait! Therefore, as long as we believe that Wall Streets gambling debt is real money and someone must pay, we will always be serfs!

It's a simple system, that due to intellectuals and the left right paradigm have made the common person blinded to the truth! "There is no spoon"

Yesterday and today, the central bankers doing whatever they can to let the big holders know, "We've Still Got Your Back" so every dip will be bought to allow the holders to unload on the rally as the CBs TRY to stairstep this mother down...

Hey! All BLM "protesters" are only volunteers that are their to voice their opposition to, to, to... to anything that they are told to be pissed about that day. They are in no way paid to be their. If they were then the people that pay them would be responsible for the violent physical attacks on people and destruction of property they cause. They are their on their own free will and not paid. No matter what you have read.

There are market crashes and market collaspes. The yellow stuff only matters in a collaspes. The people playing IN the market don't expect the market to ever "go away" so there's no point in "betting" on an event like that.

I think "the line" you mention is the "line of belief". Nearly all people IN the market "believe" it's a perpetually on-going entity, like the US (and it's perpetually waving slow-motion flag bring goodness to the entire world).

You don't bet that the flag will flop, and you don't bet against the market existing forever. For most people, even CONSIDERING this possibility would be like question the existence of a guy in the sky.